Becoming Europe

Bernie Sanders isn’t the only Democratic presidential candidate who gazes lovingly across the Atlantic. Hillary Clinton’s most ambitious ideas include expanded pre-K education and guaranteed paid family leave. Both policies would take the United States down the trail blazed by Europe’s democratic-socialist states and other countries, like Canada. Europe boasts stronger female participation rates, less poverty, and better intergenerational mobility. What’s not to like?

It’s likely that the U.S. as a whole would be much better served by adopting some of the policies that have helped make Europe more equal and economically mobile. (Though there are important differences between the Nordic Model in Scandinavia and the Continental Model in western Europe, most European countries have higher overall taxes and more spending on social insurance. ) But even wise public policies sometimes exchange one set of problems with another.

Consider, for example, the family-friendly policies that have helped more European women stay in the workforce. In 1990, the United States had the sixth highest female labor participation rate among 22 countries in the OECD. By 2010, it had fallen to 17th. America’s slip in the rankings—from sixth overall to sixth from the bottom—was due to the fact that European countries generally did a much better job at creating policies that kept women attached to the labor market, like generous parental leave and part-time work arrangements.

These policies achieved something remarkable, a terrific leap for working women. But they brought surprising downside risks, according to a 2014 paper by the economists Francine Blau and Lawrence Kahn, who have extensively researched the gender wage gap around the world.

They pointed to a tradeoff between staying in the workforce and getting ahead: European women are more likely to work. But they are less likely to have advanced careers or hold management positions than American women. Why?

In Europe, women are less likely to quit after having a baby, thanks to the generous parental leave policies of many countries there. But women also spend more weeks away from the office. When they return, they’re less likely to be promoted, having been out for so long. What’s more, several European countries have passed laws that give workers the right to demand a shift to part-time work without penalty. This encourages many women to take part-time jobs when they would otherwise work full-time. “Entitlements to long, paid parental leaves and part-time work may encourage women who would have otherwise had a stronger labor force commitment to take part-time jobs or lower-level positions,” the economists conclude. In short: It seems Europe boosts women’s labor participation at the expense of their career advancement.

Economic policy is always an attempt to achieve ideal outcomes in a world where ideal outcomes are impossible: to manufacture abundance within a world governed by scarcity. Forty years ago, the economist Arthur Okun published the book Equality and Efficiency: The Big Tradeoff. His thesis, if you couldn’t tell from the title, was that there is a tradeoff between policies that seek equality (e.g. high taxes and poverty spending) and policies that seek efficiency (e.g. low taxes and lean regulation).

In the last few years, many economists have argued that this “big tradeoff” isn’t so big, and it might not even be a tradeoff. In fact, equality might even make economies more efficient. New research summarized by economists at the OECD suggests that “when income inequality rises, economic growth falls” in large part because the poor are less likely to get an education and a productive job. A meta-analysis of preschool programs found that excellent early-childhood education programs can “generate benefits well in excess of costs.” Taxing the rich to redistribute money to the poor (particularly to poor kids) seems to improve overall growth. The big alliterative tradeoff, perhaps, isn’t between efficiency and equality but rather between greed in the short term and growth in the long term.

The Democratic Party is relatively united in its quest to make the United States a little more like Europe. Like a vision of America’s future, Europe is witnessing many of the changes that could eventually visit the United States, including falling religiosity, declining marriage and fertility rates, higher overall taxes, and far more generous social spending.

But progress, in technology or public policy, is not the diligent extermination of all human problems. It is more often the replacement of one set of problems with a different, and hopefully better, set of problems.

For example, Northern Europe does much better on poverty. Western and Northern Europe’s poor are more likely to achieve the “American” Dream of moving from the bottom quartile to the top. Between 1999 and 2008, the Eurozone and the United States expanded at the same rate, 1.6 percent, while European citizens consistently reported higher average well-being.

But socialist democratic policies haven’t shielded Europe from cultural discomforts or economic calamity. A huge run-up in public and private debt left several states vulnerable to a massive economic crisis after the worldwide financial crash. (The inflexibility of the Eurozone’s common currency didn’t help.) Meanwhile, the United States has long held an edge in technology and innovation. Between 1995 and 2006, U.S. productivity grew 2.5 percent a year while the 15 countries in the European Union saw productivity growth of just 1.5 percent. A 2008 paper investigating the transatlantic technology gap blamed, among other things, labor policies in place like France and Spain, which make it difficult to fire ineffective workers. Finally, it’s possible that the same forces that encouraged Europe’s strong welfare states, like cultural homogeneity, have also made some of its countries both "stultifyingly dull" and averse to immigration reforms that would increase their populations and promote entrepreneurship, since immigrants are more likely to start new companies.

It’s a wise instinct to seek better ideas from foreign countries. Just as American states serve as laboratories of democracy, one can regard other rich countries as laboratories of entrepreneurship and equality. But embracing Europe’s social spending and family programs also means confronting their possible risks and shortcomings. After all, policy isn’t just choosing the problems you want to eliminate. Just as often, it’s about choosing the problems you’re willing to accept.